Chancellor Rishi Sunak announced his introduction of the new “Super Deduction Tax Rules,” which would be a part of his spring budget. This enables businesses that pay tax to lower their corporation tax bill. It sounds like a great opportunity that is sure. However, what does this mean and how would this impact your business? At Tax Advisor UK, we have a brief evaluation of this new mandate so keep reading to learn more. Perhaps, you may consider hiring a tax accountant in the UK to help you handle all the necessary processes to take advantage of this.
If you do not have enough insight or knowledge about the accountancy aspect of your business, then this would sound too complex. Therefore, we recommend that you consider letting us help you.
What is Super-Deduction?
This is a new form of capital allowance. It means that companies can use this to claim tax relief and reduce their corporation tax. This is a temporary measure and will be available from 1 April 2021 until 31 March 2023. Speaking to a professional tax accountant in the UK can help you understand this better if you have no accounting background.
How to Deduce the Duper-Deduction?
Usually, companies claim 100% of the value of the assets to get tax relief. Assuming a company pays corporation tax at 19%. This would mean that the company claims 19% tax relief on assets worth £10,000. That is £1,900 tax relief. The equation below explains this:
19% of Asset Worth = Tax relief.
A super deduction would allow you to claim 130% as tax relief. If you need more guidance on this, our tax accountant in the UK can help.
Who is Eligible for the Super-Deduction?
Every business paying corporation tax qualifies for super-deduction. However, businesses that are a partnership or even sole traders are not entitled to this. This is especially great for companies that are construction businesses and manufacturers.
Why is it Being Introduced?
In the UK, there are lower levels of business investments as compared to other countries that compete with the UK’s export market. This has led to slower growth in productivity since 2008. This new announcement aims to give Britain’s capital allowances system a competitive boost and drive productivity. The government hopes to encourage an investment-led recovery for businesses that managed to survive the Covid-19 pandemic by reducing their operational costs.
Invest Wisely
Although this sounds like a great opportunity, you need to invest wisely. The success for small businesses is usually good cash flow; therefore, you need to make a great business plan to be able to make the most out of this opportunity. For this, you need a tax accountant in the UK to guide and assist you at every step of the way.
This is why we are here. Let Tax Advisor UK help you make the best business decisions to avail the of tax relief. You need to begin by making a good plan ahead of time. The super-deductions are a good incentive and would be profitable giving you ample tax relief. You need to keep in mind the limitation of the lifespan of this tax break scheme. The sooner you get started the better. Contact us so our tax accountant in the UK can help your business grow.
